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If you do have income protection insurance, you could receive up to 70% of your regular income , subject to the terms and limits of your policy. So it’s a great back-up to your existing benefits, such as employer sick leave, and can even be funded through your super. What’s more, it provides you with the security of not having to worry about the dreaded “what if?”.
If you’ve determined that income protection makes sense, and you’ve thought about your existing resources, it’s time to start working out how much cover is suitable for you.
This process is all about listing your weekly living costs and figuring a minimum monthly amount you’ll need to cover expenses. This can include costs such as:
Also remember that income protection policies will only cover up to 70% of your regular monthly income, subject to the terms and limits of your chosen policy.
One big thing when to keep in mind when considering this question, is that taking out income protection insurance can make more sense to some people depending on their specific circumstances.
If you fit into any of the following categories, then income protection could be a financial product worth considering:
The first thing to think about will be how long you’ll be able to pay your unavoidable expenses if you can’t work. When considering this, remember to factor in whether you have:
When assessing the risk in insuring you and calculating your income protection premiums, insurers consider a whole range of factors to determine how much risk you carry. These can include:
When you take out income protection insurance, you can generally choose to pay either stepped or level premiums.
Stepped Premiums mean that the amount you pay in premiums increases each year as you get older. Stepped premiums are re-calculated based on your age at each policy anniversary. This generally means your premium rate will start lower than the level premium structure, but will go up each year as risks increase.
Level premiums can give you more certainty on the future cost, especially if you’re planning to keep your cover for many years. The premium is based on your age at the start of the policy. Premiums can increase if you have chosen to apply inflation protection or indexation to your policy. Premiums can also increase if you make changes to your policy or if the insurer increases the premium rate across all policyholders. Level premiums generally end at the policy anniversary before age 65 and will change to the corresponding stepped premium for your age until your policy expiry.
At iSelect, we’ve partnered with LifeBroker to make it easier for iSelect customers to compare income protection products and find a suitable policy. Click here to get started online.
Last updated: 29/09/2021